31 Mar Coronavirus (COVID-19) Economic Stimulus Update
There have been a lot of announcements from the Federal and State Governments this week in response to economic stimulus packages to boost businesses impacted by COVID-19 (Coronavirus).
In addition to the detail that is slowly becoming available about how some of these initiatives will be applied we intend to keep you up to date with the practical information and support on how businesses are adjusting to the current business environment. Some of the initiatives are technical in nature, some require a practical approach. We will keep you informed on developments as they come to hand.
If you have any questions in respect to how any of these announcements may apply to you, please get in contact with the team at Boss Private Clients.
Federal Government Initiatives
ATO Relief – PAYGW Refunds
- These tax-free payments are to help businesses cover employee wages and applies to businesses and Not For Profit entities with a turnover of less than $50 million that employ staff, between 1 January 2020 and 31 October 2020.
- The employer must be registered for PAYGW by 12 March 2020 in order to qualify.
- For employers with monthly Activity Statement lodgements, the March 2020 credit will be calculated at three times the rate, to cover for the January and February months.
- 100% of PAYG withheld between January 2020 and June 2020 will be credited to a maximum of $50,000 for the six month period. The minimum amount an employer will be able to receive is $10,000, up to the maximum of $50,000 for this period.
- A registered employer that has less than $10,000 PAYG Withholding in the period January 2020 to June 2020 would qualify for the minimum payment of $10,000 before June and for the subsequent payment after June 2020. We understand this would apply even if a registered employer did not pay any wages for the period. They just have to be registered. Please note the anti-avoidance provisions below.
- An additional payment is also being introduced in the July — October 2020 period equal to the total of the PAYG withheld refunded in the previous six months to provide a total refund of up to $50,000 per entity. To qualify the entity must continue to be active. Monthly lodgers will qualify for 25% of the amounts of PAYGW credited as part of the initial payment paid over the months of June to September (payment period July to October). Quarterly lodges will receive 50% of the payment they are entitled to in the June 2020 and the September 2020 Qtr BAS.
Monthly BAS Lodgement Example:
- A business which employs staff, lodges monthly BAS’s. All staff are on salary, and a monthly PAYGW of $9,000 is declared each BAS.
- On the March 2020 BAS, the $9,000 is claimed in W2. The ATO will automatically apply a credit in the Running Balance Account of $27,000 ($9,000 January BAS, $9,000 February BAS and $9,000 March BAS).
- On the April 2020 BAS & May 2020 BAS, the $9,000 is claimed in W2. The ATO will automatically apply a credit of $18,000. The June 2020 BAS will have a credit applied of $5,000, being the balance of the amount receivable under the announcement. If the entity then continues to trade the June BAS will contain a further $12,500 being the amount due under the second part of the $50,000 tax-free payment. The July 2020, August 2020, September 2020 BAS will then contain a credit of $12,500 each for the balance of the $50,000 due under the additional $50,000 payment.
|Boosting Cash Flow-1st Measure||PAYG Withholding||% Available as a credit on BAS||Credit to Taxpayer||Running total redeemed||Boosting Cash Flow-2nd Measure||% Available as a credit on BAS||Credit to Taxpayer||Total reduction of PAYW per month||Month credit applied/ cash received|
|Limit for 1st measure is $50,000|
|Limit for 2nd measure is $50,000|
|Limit for total measures is $100,000|
- PAYGW credits will apply on a per entity, ABN basis. Therefore, if you have two entities conducting business in your group structure each entity is eligible for PAYGW BAS credits of up to $50,000 provided each entity has paid $50,000 in PAYGW during the period 1 January 2020 to 30 June 2020.
- Maximum total refund per entity is $100,000.
- Special anti-avoidance provisions have been drafted into the bill which would prohibit an employer from engineering a situation where they would obtain a larger refund than they would otherwise be able to claim.
- Upon lodgement of the March 2020 quarter Business Activity Statements, the ATO will automatically apply a credit to the entities Running Balance Account in the amount of the PAYG tax withheld reduction from 28 April 2020.
- The ATO has advised that where these credits result in an entity having a net refundable amount, refunds will be paid within 14 days to the entity’s nominated bank account.
Lodgement of BAS – Directors personally liable
- From 1 April 2020 directors are automatically personally liable for the GST and PAYG liabilities of the company they act as director for where the company lodges an activity statement more than three months from the date of lodgement of the BAS.
- This applies to future BAS liabilities, rather than any debt that has accrued prior to that date, provided that liability is lodged prior to 1 April 2020.
It is therefore critical that businesses keep lodging their activity statements on time through this period and organise payment deferral options with the ATO if they are not able to pay. Further information in respect to this is below.
For more information on the new rules in respect to personal liability for directors please refer to the following article: https://bit.ly/2WEyywC
ATO Relief – Tax Payment Deferral Options
- Deferring by up to six months the payment date for BAS amounts due (including PAYG instalments, income tax assessments, FBT assessments and excise.
- Allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter; businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to outstanding tax liabilities.
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans, and
- Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
Instant Asset Write Offs and Accelerated Depreciation
- Applicable to assets purchased after the 12th March 2020
- An increase in the instant asset write off threshold from $30,000 to $150,000 and expanding access to these write-offs to include businesses with aggregated annual turnover of less than $500 million until 30 June 2020.
- For assets with a purchase price of more than $150,000 or purchased after 30 June 2020, businesses with aggregated annual turnover of less than $500 million, in addition to the standard depreciation a claim for assets, will be able to deduct 50% of the asset cost in the year of purchase via a time limited 15 month investment incentive through to 30 June 2021.
- Assuming that a business purchases a new truck for $250,000 (exclusive of GST) in May 2020.
- In the 2020 tax return the business would claim an upfront deduction of $125,000. The business would also claim a further deduction for the depreciation that would have arisen on the balance of the cost.
- Assuming a depreciation rate of 15%, this would mean an additional deduction of $18,750 (i.e. 15% x $125,000). The total deduction in the 2020 tax return would be $143,750.
- Without the introduction of this investment incentive the business would have claimed a deduction of $37,500 (i.e., 15% x $250,000).
Corona virus SME Guarantee Scheme
- This Scheme is designed to provide working capital support to SME’s (businesses with turnover of less than $50 million) to get through the impact of the corona virus.
- Under the Scheme, the Federal government will guarantee 50 per cent of new SME unsecured loans issued by eligible lenders up to the value of $250,000. This effectively represents a guarantee of $125,000.
- The government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME, and will remain available into the future, with interest only on the funds that are drawn down.
- The Scheme will commence in April 2020 and loans will be made available by participating lenders until 30 September 2020. The loans will be made under a term of 3 years with an initial 6 month repayment holiday. No assets will be required as security for these loans.
- These conditions apply only to new loans, not refinanced loans.
- No fees will be payable on the establishment of the loans.
Bank Care Package
- The Australian Banking Association (ABA) has announced a relief package that includes a deferral of principal and interest repayments for all term loans and retail loans for six months for small business customers with less than $3 million in total debt owed to credit providers.
- At the end of the deferral period, businesses will not be required to pay the deferred interest in a lump sum. Either the term of the loan will be extended, or the level of loan repayments will be increased. The package applies to all ABA member banks who agree to participate (listed below).
To read more about how each bank is assisting click on the name of the bank below.
- Commonwealth Bank of Australia
- Macquarie Bank
- National Australia Bank
- Bank of Melbourne
- Suncorp Bank
Funders outside of the (ABA) who are providing support are also listed below:
Insolvency – Temporary Relief for Financially Distressed Businesses
The Government has announced temporary changes on insolvency laws (Corporations Act 2001). These proposed changes are designed to give businesses time to assess their solvency, implement restructuring plans where needed and take advantage of the safe harbour provisions under the Corporations Act 2001.”
The Most Notable Changes Are:
- A temporary increase in the statutory demand threshold to $20,000;
- An increase in the time to comply with a statutory demand from 21 days to 6 months;
- A temporary increase in the size of the of the debt required to issue a creditor’s petition to $20,000;
- An increase in the time to comply with a bankruptcy notice from 21 days to 6 months;
- The moratorium on action against a debtor following the presentation of a declaration of intent to present a debtor’s petition is increased to 6 months; and
- A six-month moratorium on directors’ insolvent trading liability, for debts incurred in the ordinary course of business.
Insolvency is a highly specialised area of the law. If you have any concerns about your exposure, please don’t hesitate to us and we will put you in contact with an insolvency specialist.
Superannuation & Social Security for Individuals and Sole Traders
Early Release of Superannuation
- The Government will allow individuals in financial stress to access up to $10,000 of their superannuation in the 2020 financial year and a further $10,000 in the 2021 financial year.
- To be eligible for early release of superannuation you must either have:
- Been unemployed, or
- Been eligible to receive Jobseeker payment, Youth Allowance for job seekers, Parenting Payment, Special Benefit or Farm Household Allowance, or
- Been made redundant on or after 1 January 2020, or
- Had your working hours reduced by 20 percent or more, or if you were a sole trader had your business suspended or experienced a reduction in your turnover of 20 percent or more
- Those who are eligible are able to apply through the myGov websitefrom mid April 2020 to access the funds before 1 July 2020 for the first $10,000 and have three months after this date to access more. These funds will not be taxed and will not affect Centrelink or Veterans’ Affairs payments.
Superannuation Pensions Minimum Draw Down Rates
- The Government is temporarily reducing the superannuation minimum draw down requirements for account based pensions and similar products by 50% for the 2019/20 and 2020/21 financial years. This will provide more flexibility as to how superannuants manage their superannuation assets. A table which summarises the change is provided below:
|Age of beneficiary||Temporary percentage factor
(2019/2020 and 2020/2021)
|Normal percentage factor
(2013/2014 to 2018/2019)
|65 to 74||2.5%||5%|
|75 to 79||3%||6%|
|80 to 84||3.5%||7%|
|5 to 89||4.5%||9%|
|90 to 94||5.5%||11%|
|95 or more||7%||14%|
No Relief For Employer Super Obligations
- Employers will still need to meet their ongoing super guarantee obligations for their employees.
- A super guarantee amnesty still exists for obligations up to 31 March 2018 if applications are made and the superannuation is paid before 7 September 2020. m
Varying lease payment terms where a SMSF is the landlord
Where the tenant is unrelated to the SMSF, all options are possible – rent reduction, deferral or holiday.
Where the tenant is related to the SMSF, we advise a rent reduction due to market circumstances until further notice. The definition of a loan includes ‘financial accommodation’ and our concern is a rent deferral or holiday may be technically captured as an in-house asset and could cause audit issues. Our superannuation experts are trying to clarify this with the ATO.
Any changes should be documented and consistent with lease terms. Lease terms may need to be varied. Please read further below in respect to leases.
Recent market volatility may be an opportunity to consider restructuring existing investments to achieve a better overall outcome. It may be possible to move listed shares otherwise held into the family super fund for little or no CGT.
Care must be taken if considering such a strategy, for example:
- Being able to do this using contribution caps available
- Whether the fund ought to pay cash for the shares or via a LRBA
- To ensure that the tax rules in respect to in-specie transfers are complied with as well (45-day holding rule for instance).
If you require any further information regarding the above, please contact us.
- The government has introduced a wage subsidy to support small businesses to retain their apprentices and trainees. Businesses may be eligible to receive 50 per cent of their apprentice’s wages, capping at $21,000, per apprentice, for the nine months from 1 January 2020 to 30 September 2020.
- Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network provider. Like other assessments, this is expected to be completed via a SmartForm on the Australian Apprenticeship website.
- Applications to your Australian Apprenticeship Support Network provider are expected to be available from 2 April 2020.
- Employers can register for the subsidy from 31 March 2020, and final claims of payment must be lodged by 31 December 2020.
Income Support For Individuals & Sole Traders
- Two $750 stimulus payments to pensioners, social security, veteran and other income support recipients and eligible concession card holders. The first of these payments was announced on 12 March 2020 and the second will be automatically made on 13 July 2020. The payment will be tax-free and will not count as income for social security, farm household allowance, and veteran payments.
- From 27 April 2020, the Government is also temporarily expanding eligibility to income support payments to include sole traders and establishing a new time limited Corona virus Supplement to be paid at a rate of $550 per fortnight for the next 6 months on top of existing entitlements.
- The Corona virus Supplement will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit and be in addition to the payments made on under these allowances.
- The Jobseeker payment is currently $550 per fortnight and the addition of the Corona virus Supplement increases this payment to $1,100 per fortnight.
- Sole traders and casual workerswho are currently making less than $1,075 a fortnight will be eligible to receive the full supplement.
STATE GOVERNMENT INITIATIVES
- Full payroll tax refunds for the 2019-20 financial year to small and medium-sized businesses with taxable wages of less than $3 million per member entity of a group.
- Payments will start flowing next week and the assistance is a refund, not a loan or deferral.
- Eligible businesses must continue to lodge returns but do not need to make further payments for this financial year.
- The State Revenue Office will directly contact eligible businesses in relation to reimbursement for payroll tax already paid in the financial year.
- The same businesses will also be able to defer any payroll tax for the first three months of the 2020/21 financial year until 1 January 2021.
There is a process for applying for a refund. Click on this link to find out more:
New South Wales
- The NSW Government has announced that they will waive payment of payroll tax for businesses with payrolls of up to $10m, for the months from April to June 2020. Businesses will still need to continue lodging their payroll tax forms if already lodging monthly.
- Those eligible businesses will then receive a 25% discount on their payroll tax liability once they lodge their annual reconciliation.
- Also, the payroll tax threshold will be raised to $1m in 2020/21, thereby bringing forward another round of payroll tax cuts for eligible businesses.
- Businesses paying payroll tax, with a payroll between $1m and $4m will receive a one-off grant of $17,500.
- In addition, the increase of the payroll tax threshold to $1m will be fast-tracked to 1 July 2020, six months before the originally planned date. This means smaller businesses will potentially be able to fall out of the payroll tax regime sooner than before.
- Small and medium-sized businesses, who pay $7.5m or less in Australian taxable wages and have been affected by COVID-19, can apply for a deferral of their 2019/20 payroll tax payment until 21 July 2020.
- The QLD Government are offering a deferral of March to June payroll tax returns until the 31st of July 2020. To be eligible:
- An employer, or employer that is part of a group, will have a payroll of $6.5 million or less; and
- Your current turnover, profit, customers, bookings, retail sales, supply contracts or indirectly affected by COVID-19.
- There will be a 6-month waiver on payroll tax for the hospitality, creative arts and entertainment industries.
- There will also be access to interest-free deferrals of payroll tax commencing on 1 July 2020 for all businesses up to a payroll threshold of $10m in Australian taxable wages.
- Payroll tax for the last four months of income year 2019/20 will be waived for businesses in the hospitality, tourism, seafood and exports sectors.
- Affected businesses in other sectors with an annual payroll not exceeding $5m in Australian wages, can apply for a waiver of payroll tax for the three months of April, May and June 2020.
Land Tax Deferral (Victoria)
- Landowners due to pay 2020 land tax that have at least one non-residential property and total taxable landholdings below $1 million have the option of deferring their 2020 land tax payment until after 30 June 2020.
- The State Revenue Office will contact all taxpayers who are eligible for this deferral
Liquor Licence Fees
- Waiving of liquor licensing fees for 2020 for affected venues and small businesses.
- Businesses that have paid for a renewable liquor licence for 2020 will be reimbursed their licence fee and this yet to pay will have the fee waived.
- The State Revenue Office will administer the reimbursement, regardless if whether the liquor licence fee was paid to it or the Victorian Commission for Gaming and Liquor Regulation.
- Provide a 50% discount in liquor licensing fees and waiver of application fees for the entire 2020 calendar year
Each State Government Announcement is attached
New South Wales
Australian Capital Territory
OTHER ISSUES OF NOTE
In respect to staff issues we recommend you seek advice from an employment lawyer. Some of the issues we have seen or applied in respect to employment issues include:
- Whether time out of the office for whatever reason may constitute a leave payment,
- What to do if you want to retain employees but cannot afford to pay them during an anticipated short term downturn. The difference between the stand down provisions and leave without pay are of particular interest as they provide options to employers to retain staff in these uncertain times without going through the process of having to make substantial payouts.
- Work safe issues for employees also need to be considered when they are instructed to work from home.
- How the issues above interact with FairWork Australia are provided in a link below.
Standing Down Vs Leave Without Pay (LWOP)
|Annual Leave, Personal Leave & Long Service Leave (LSL) Accrues during stood down period||Annual Leave, Personal Leave & Long Service Leave (LSL) Accrues does not accrue whist employee is on leave without pay|
|Employee is still entitled to public holiday payments if they would have worked that day||If an employees agrees to take leave without pay then an employee is not paid public holidays|
|Can use annual leave or LSL but it is at the Employers discretion||Can use annual leave or LSL but it is at the Employers discretion|
|No sick leave entitlements||No sick leave entitlements|
|Continuity of service still applies||Continuity of service still applies|
|Standing Down Employee can be forced, it is not a choice for the Employee||Employer and employee must agree to LWOP, it cannot be forced|
|Standing down can only be an option when the situation is beyond the Employers control and the role is not made redundant. Employment will resume once the situation is back to normal (Eg: Pandemic) – Employees cannot request to be made redundant||Employee can request to be made redundant during this period – This could impact the business financially|
If you need support in this area we recommend you seek advice from an appropriately qualified legal professional. Please contact us if you need assistance in this regard.
Retail and Commercial Leases
We have seen tenants commence negotiations with landlords in respect to obtaining a discount on rental payments over the period of a lockdown. This started occurring before the Victorian Government announced it would provide some form of rental relief for tenants that have leased property owned by the state government. Such discussions between landlords need to be dealt with on a case by case basis. Landlords circumstances and issues around these negotiations include the financing commitments of the property, the market for tenancy in general and potentially opportunistic tenants. Tenants circumstances could include the reduction in turnover, uncertainty over these coming months. We have also provided considerations for SMSFs with leased property in the section regarding superannuation.
The following article is a useful tool which addresses the various issues landlords and tenants will be facing: https://bit.ly/39lrJmi
It is important to obtain legal advice about your lease. Please contact us if you require assistance and we will put you in contact with a suitable lawyer.
Please contact Sam Cimino, Sam Marzano or anyone in your client service team at Boss Private Clients if you have any questions regarding the above on (03) 8602 6100.